Even as the unofficial GDP back series numbers seem to be in the right direction as per the methodology adopted, the official figures may diverge from what the report calculated, top experts tell FE Online.

Unofficial GDP back series issue: Top experts say how officially revised GDP data may be different

All hell broke loose last Friday when back series GDP data calculated by a committee showed a 10% plus economic growth rate in two financial years in the late 2000s — until it was declared ‘unofficial’ and forbidden.

And even as the unofficial GDP numbers seem to be in the right direction as per the methodology adopted, the official figures may diverge from what the report calculated, top experts tell FE Online.

India’s first chief statistician Pronab Sen, under whom the base year for calculation of national accounts was changed to 2011-12 from 2005-06, told FE Online that it is possible for the official numbers to be different from committee’s calculation.

“The estimates given in the report uses the same methodology for all sectors. The CSO may not do that and choose to use different methodologies depending on which is felt to be better for each sector,” Pronab Sen said.

The committee, appointed by the National Statistics Commission to write a report on Real Sector Statistics, discussed alternative approaches for converting the old GDP series to the new base year 2011-12 while undertaking production shift approach in the calculation.

This methodology has an upwards bias. “…The new methodology with the concept of GDP at market prices would show a higher level than the earlier series which was at factor cost,” noted economist Madan Sabnavis said, adding that market prices include net indirect taxes, which was not the case in old series calculation based on factor cost.

He suggested that the most preferred methodology could be the one adopted by the committee involving production shift in the economy. Madan Sabnavis also said that the GDP numbers may change if the approach is changed.

“Put in a simple manner, if we are to arrive at value added of a product which was not tracked prior to 2011-12 but has come into the new basket, one could use proxies in different ways and come up with at times different trends. This is a challenge whenever such an exercise is undertaken,” he said.

Other two alternatives for generating back series data were: 1) based on the new GDP methodology by using the base data wherever available. 2) Projection of the old series using the base year 2004-05 forwards up to, say, 2014-15, then adjust it to the 2011-12 base by comparing it with the new series.

The base year for national accounts was changed in 2014 to include more sectors into GDP calculation with an aim to give a more realistic picture of the economic growth.

On one hand, the government is yet to finalise the back series GDP data prior to 2014-15, and on the other hand, the base year for national accounts has been changed once again to 2017-18. This could make even the new back series data with the base year 2011-12 uncomparable with the new series with 2017-18 as the base year.

Changing the base year does have a significant impact on the GDP numbers. When the base year was changed, Pronab Sen said, the level of GDP in 2011-12 was reduced by nearly 2%, as trade sector in the old series was “seriously overestimated”, while the manufacturing sector was scaled upwards.